Wednesday, January 06, 2016

Right policy push can help aviation grow 20 pct

Around seven months ago, the feedback of the aviation industry to the government on its first year’s performance was scathing (‘Engines revving, but yet to take off’, FE, May 26, Fortunately, the government took the feedback constructively and, within 10 days, RN Choubey, a hard-working, no-nonsense administrator was brought in as the new aviation secretary. By October 2015, the ministry came out with a draft National Civil Aviation Policy (NCAP) which had been pending for decades.
The NCAP has been welcomed by the industry. It sets an ambitious goal of 300 million domestic tickets by 2022, a massive jump from the 80-odd million tickets sold in 2015. The government plans to achieve this by increasing India’s domestic and international connectivity, and reducing the cost of flying.
Overall, 2015 was a good year. Traffic during the January-November period grew to 73 million, a 20.4% growth year-on-year, making India the fastest-growing aviation market in the world. The year will also be remembered for the spectacular revival of SpiceJet from near-death; restoration of India’s category-I status by the US Federal Aviation Administration; continued slide in oil prices; reduction in ATF taxes by many states; and IndiGo placing a headline-grabbing order for 250 aircraft and following it up with a highly-successful IPO.
As India embarks on a high-growth phase, safety and security would be key. December 2015 saw a landing aircraft being hit by wild boars in Jabalpur, an engineer getting sucked into a jet engine in Mumbai, a BSF aircraft crashing in New Delhi, and a bus ramming into an aircraft in Kolkata … all in a space of one month. Heads must roll, starting from the top.
The safety watchdog, Directorate General of Civil Aviation (DGCA), needs a strong, reform-oriented director general for an uninterrupted five-year tenure. The person needs to ensure e-governance, transparency, efficiency and minimal harassment of the industry. Currently, the director general post is an ad hoc posting for ministry of civil aviation officials waiting for next assignment.
On January 1, 2015, the price of aviation turbine fuel (ATF) for international and domestic airlines fell to Rs 30 and Rs 40 per litre, respectively. These are still 35% and 80% costlier, respectively, than the global ATF price, which is Rs 20-24 per litre. The government can kick off an aviation revolution if it decides to sell ATF at the global rate for just one year, as an experiment.
The infamous, oligopolistic ‘5/20 Rule’ of 2004 prevents new Indian airlines from flying abroad till they complete five years and have 20 aircraft. Its abolition is long overdue. A simpler approach of 1 year/5 aircraft or 2 years/10 aircraft may adopted, if its outright abolition is politically risky. Linking it to the complicated domestic flying credit system should be avoided.
06/01/16 Amber Dubey/The Financial Express
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